Correlation Between NEXT Plc and American Airlines
Can any of the company-specific risk be diversified away by investing in both NEXT Plc and American Airlines at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NEXT Plc and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXT plc and American Airlines Group, you can compare the effects of market volatilities on NEXT Plc and American Airlines and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NEXT Plc with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXT Plc and American Airlines.
Diversification Opportunities for NEXT Plc and American Airlines
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NEXT and American is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NEXT plc and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and NEXT Plc is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NEXT plc are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of NEXT Plc i.e., NEXT Plc and American Airlines go up and down completely randomly.
Pair Corralation between NEXT Plc and American Airlines
Assuming the 90 days horizon NEXT plc is expected to generate 0.68 times more return on investment than American Airlines. However, NEXT plc is 1.47 times less risky than American Airlines. It trades about 0.09 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.01 per unit of risk. If you would invest 7,319 in NEXT plc on September 2, 2024 and sell it today you would earn a total of 4,591 from holding NEXT plc or generate 62.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXT plc vs. American Airlines Group
Performance |
| Timeline |
| NEXT plc |
| American Airlines |
NEXT Plc and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXT Plc and American Airlines
The main advantage of trading using opposite NEXT Plc and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXT Plc position performs unexpectedly, American Airlines can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Airlines will offset losses from the drop in American Airlines' long position.| NEXT Plc vs. DELTA AIR LINES | NEXT Plc vs. Clearside Biomedical | NEXT Plc vs. URBAN OUTFITTERS | NEXT Plc vs. MYFAIR GOLD P |
| American Airlines vs. Southwest Airlines Co | American Airlines vs. Superior Plus Corp | American Airlines vs. NMI Holdings | American Airlines vs. Origin Agritech |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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